GGRAsia – Playtech deal valuation higher if Aristocrat cuts risk: analyst

Playtech deal valuation higher if Aristocrat cuts risk: analyst

Oct 19, 2021 Newsdesk Latest News, Rest of Asia, Top of the deck

Aristocrat Leisure Ltd’s proposed AUD3.9-billion (US$2.9-billion) acquisition of online gambling platform provider Playtech Plc could rise to a valuation multiple 15.5 times Playtech’s adjusted 12-month earnings before interest, taxation, depreciation and amortisation (EBITDA), rather than 11.4 times as mentioned by the suitor, said a Monday note from David Bain, an analyst at Riley Securities Inc.

Slot machine and online gaming content provider Aristocrat announced on Monday a suggested cash acquisition of London-listed Playtech at GBP6.80 (US$9.40) per share, a 58 percent premium to Playtech’s closing price on October 15.

The intent of Aristocrat to “review Playtech’s regulatory exposure” was “likely” to lift “purchase valuation closer to 15.5 times trailing 12-month” adjusted EBITDA, wrote Mr Bain.

Aristocrat had mentioned in a presentation filed on Monday with the Australian Securities Exchange: “If the acquisition proceeds to completion, Aristocrat intends to conduct a review of the jurisdictions in which Playtech’s business operates, and the nature of Playtech’s business in certain jurisdictions to determine alignment with Aristocrat’s risk appetite and regulatory licences to operate.”

Mr Bain added: “We believe Aristocrat will likely shed certain Asian and other markets Playtech operates, boosting the multiple paid for Playtech.”

The Riley Securities analyst further observed: “While Aristocrat intends to utilise Playtech to focus more broadly on accelerating growth of technology/content supply in North America – amongst other initiatives – we do not see a major competition/market share shift at this point.”

A Monday note from Donald Carducci and Michael James, of JP Morgan Securities Australia Ltd, said that Aristocrat acquiring Playtech’s “platform abilities” would allow Aristocrat “to capture distribution fees and associated content licensing”.

The JP Morgan analysts added: “The benefit of using content to drive recurring revenue with platform agreements cannot be overlooked.”